Jim Wilkinson, a VAT specialist at accountant PricewaterhouseCoopers, said retailers were arguing that the money they received from fraudulent transactions resembled an insurance claim rather than a retail sale.

Retailers pay card companies a fee to guarantee that they will be paid in the event of a fraudulent transaction - so keeping the cash from fraudsters is a way of claiming against that guarantee.

There are 20 claims in play, but he predicted that other companies would follow suit and file claims. The sums involved could end up being 'significantly higher', he said. The case could cut retailers' VAT bills by £10million to £15million a year.

The European Court of Justice is likely to hear the claim in 2014, after which the battle will come back to the UK tax courts.

Up to one per cent of transactions at Dixons are fraudulent. The frauds include those where credit cards have been cloned, obtained by deception or cases of identity theft.

A spokesman for Revenue & Customs said it could not comment on 'ongoing litigation'.